A high level executive at a Wall Street investment bank learned a tough lesson recently. According to a published news report, he was at a New York City holiday party and left expecting to find his car and driver at the curb. When it did not arrive, he hailed a cab for the 40 mile ride to his Connecticut home.
When he got there, according to the report, the driver asked for more money than the executive said he negotiated. He refused and the cab driver took him on a ride through the town, running stop signs and speeding so that his passenger could not get out. The executive pulled the small knife he had been using to open holiday presents and threatened the driver. The driver fought back and was cut on his hand. They stopped at the police station.
Initially, the police arrested the executive for assault and then considered kidnapping charges against the driver. After hearing both stories, the police dropped all charges and released both.
That’s the good part. The big city investment bank terminated the executive’s employment and his multi-million dollar salary based on a good behavior clause in his employment contract. Pouring salt on the wound, it also reneged on paying several million dollars in deferred compensation for the same reason. The courts will ultimately decide.
What’s the lesson here? Watch the language!
Good behavior clauses, morals clauses or provisions for “termination for cause” often seem benign when employment and benefit agreements are first signed. Everyone is happy and calm and the future looks rosy. Then, stuff hits the fan. The employer is unhappy, terminates the executive and looks behind every word in every document to hold onto dollars.
The best advice is to make the provisions as specific as possible. General language such as “behavior detrimental to the employer” or “as determined by the board of directors” is often found and can be very broad in application and interpretation. At the least consider a cure provision where the executive has a period of time to “correct” the issue. Also consider a requirement that a super majority – as much as 75% of the board is required to trigger a termination or forfeiture clause. Make the provisions as narrow as possible.
These agreements are signed with the idea of successful, productive employment accompanied by appropriate rewards. When they go bad, things can get nasty. It’s better to have a well drafted agreement up front than to have to invest dollars and time in messy litigation.
For further information contact Barry N. Koslow at bkoslow@mkaplanners.com or 781-939-6050.
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